Law of Trusts
Private and Public Trusts; What Counts as a Charitable Purpose
Part J of this series turns to public, charitable and religious trusts, which Section 1 of the Indian Trusts Act leaves outside the Act. The first question in any such case is whether the trust is private or public, because the answer decides which law governs, who can enforce it, whether it can last forever, and what happens if its purpose fails. The second is whether its purpose is charitable. This note explains both.
1. Why the Distinction Matters
Point | Private trust | Public trust |
|---|---|---|
Governing law | Indian Trusts Act, 1882 | General law of public trusts; Section 92 CPC; State public trust and endowment Acts; central endowment statutes |
Beneficiaries | Ascertained or ascertainable individuals | The public or a section of it, a fluctuating body |
Enforcement | The beneficiaries | The Advocate General, or two or more persons interested with leave of the court (Section 92 CPC), or a statutory authority |
Duration | Subject to the rule against perpetuity | May be perpetual |
Ending by beneficiaries | All competent beneficiaries may end it (Sections 56 and 78) | No beneficiary can end it |
Failure of purpose | Results to the author (Section 83) | May be applied cy-près (Topic 43) |
Tax | Taxed as a private trust (Topic 47) | Exemption on registration, if charitable (Topic 48) |
2. The Test: Who Are the Beneficiaries?
The leading test comes from Deoki Nandan v Murlidhar (Supreme Court, 1956), a case about a temple: a trust is private when the beneficiaries are specific individuals, and public when they are the general public or a section of it, an uncertain and fluctuating body whose members cannot be individually identified at any given time (Topic 57).
Indications the courts consider
- The terms of the instrument, if any, read as a whole; the label "private" or "public" is relevant but not decisive.
- Whether the public has a right to use the property, for example to worship in a temple or use a dharmshala, as distinct from use permitted at the family's pleasure.
- Long public user and public contributions, which may evidence a public dedication even without a document.
- Management: whether the institution is managed as a family affair or as a public institution with public accounts.
- The nature of the institution: a family deity installed in a private house points to a private endowment; a large temple open to all points the other way.
A section of the public
A trust for a section of the public, such as the residents of a town, members of a profession, or followers of a faith, may be public. The class must be defined by an impersonal characteristic and must not be numerically negligible. A trust defined by personal relationship to named individuals, such as the author's descendants or the employees of a particular firm, is generally treated as private, even if it is benevolent.
Partly public, partly private
A trust may combine purposes: income to the author's family, with a fixed sum for a public charity. Each part is governed by its own law, and where the two cannot be separated, courts look at the dominant purpose.
3. What Is a Charitable Purpose?
The Indian Trusts Act does not define charity. The concept comes from English law and from Indian statutes.
The English heads
English law classifies charity under four heads set out in Income Tax Special Purposes Commissioners v Pemsel (1891): (1) relief of poverty, (2) advancement of education, (3) advancement of religion, and (4) other purposes beneficial to the community. A charitable purpose must also involve public benefit.
Indian statutory definitions
Statute | Definition |
|---|---|
Charitable Endowments Act, 1890 | Includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but not a purpose relating exclusively to religious teaching or worship |
Income-tax law | Relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife), preservation of monuments or places or objects of artistic or historic interest, and advancement of any other object of general public utility, the last subject to limits on trade, commerce or business activity |
The Supreme Court considered the last category, general public utility, and its limits on commercial activity in ACIT (Exemptions) v Ahmedabad Urban Development Authority (2022), holding that an entity pursuing general public utility must not carry on trade, commerce or business, or services for a fee, beyond the limited extent permitted (Topic 59).
Religious purposes
In India, religious purposes, such as maintaining a temple, mosque, gurdwara or church, or conducting worship and festivals, are an important class of public trust. Many statutes treat "religious" and "charitable" as separate categories, while English law includes religion within charity. A purpose may be religious, charitable, or both, and the classification matters for the applicable statute and for tax exemption.
4. Creation of a Public Trust
- No writing necessary in general law: a public religious or charitable trust may be proved by evidence of dedication, including long public use, even without a deed. State public trust laws, however, require registration.
- Complete dedication: the property must be completely dedicated; a partial dedication, where the family retains the property subject to a charge for religious or charitable purposes, creates only a charge, not a public trust.
- Certainty: courts are generous to charitable gifts. A gift for "charity" or "religious and charitable purposes" in general may be upheld, with the court framing a scheme, whereas a private trust with such vague objects would fail.
⚠ Key point A trust is private if its beneficiaries are specific individuals and public if they are the public or a section of it (Deoki Nandan v Murlidhar, 1956), judged by substance: the instrument, public rights of use, public user and contributions, and management. Public trusts are outside the Trusts Act, are enforced under Section 92 CPC or statute, may be perpetual and are applied cy-près on failure. Charity covers relief of poverty, education, religion and other purposes of public benefit (Pemsel, 1891), with Indian statutes listing relief of the poor, education, medical relief, environment, monuments, yoga and general public utility (the last limited by AUDA, 2022). Dedication may be proved without writing, but must be complete. |
5. Related Topics and Provisions
- Scope of the Act (Topic 3): the Section 1 exclusions
- Section 92 CPC and public trust litigation (Topic 41)
- The cy-près doctrine (Topic 43)
- Taxation of charitable and religious trusts (Topic 48)